Exchange traded funds (ETFs) headed lower Wednesday following disappointing U.S. economic news and worries about the nuclear crisis in Japan.
- Housing starts posted their biggest decline in 27 years in February, while building permits dropped to their lowest level on record, suggesting the beleaguered real estate sector has yet to rebound from its deepest slump in modern history. Groundbreaking on new construction dropped 22.5% last month to an annual rate of 479,000 units, according to Commerce Department data released on Wednesday. This was just above a record low set in April 2009 and way below the estimates of economists, who had been looking for a smaller drop to 570,000. The iShares Dow Jones U.S. Real Estate ETF (NYSEArca: IYR) is down slightly in early trading.
- Japanese shares rebounded Wednesday, attempting to recoup some of the hefty losses suffered the previous two days, even as the threat of a major nuclear radiation leak kept investors on edge. After losing more than 16% of its value in the previous two days, the Nikkei Stock Average finished 5.7% higher on Wednesday, with gains spread widely across sectors. The advance, which also snapped a four-day losing-streak, was the Nikkei’s biggest increase since its 5.8% surge on Nov. 10, 2008. The rise, although tentative against the background of continued crisis at the stricken Fukushima Daiichi nuclear power facility, came as investors drew some comfort from the Bank of Japan’s efforts to grease the short-term money markets by injecting massive doses of liquidity. The iShares MSCI Japan Index ETF (NYSEArca: EWJ) is down almost 2% on Wednesday.
- Producer prices surged in February at their fastest pace in just over 1-1/2 years, pointing to a build-up in pipeline inflation pressures from soaring food and energy costs. The Labor Department said on Wednesday its seasonally adjusted index for prices paid at the farm and factory gate jumped 1.6%, the largest increase since June 2009 after rising 0.8% in January. That was more than double economists’ expectations for a 0.7% rise last month. In the 12 months to February, producer prices increased 5.6%, the biggest rise since March, after advancing 3.6% in January. The Direxion Daily 20+Year Treasury Bull 3x Shares ETF (NYSEArca: TMF) rose over 1% in early trading.
- Crude-oil futures rebounded Wednesday after suffering their biggest one-day drop since October, as traders monitored the situation at a damaged Japanese nuclear plant as well as political turmoil in Bahrain. “It’s a reassessment of what’s happening in Japan,” said Christophe Barret, global oil analyst at Calyon. The violence in Bahrain has concerns about supply in focus. The ProShares Ultra DJ-UBS Crude Oil ETF (NYSEArca: UCO) is up approx. 2.5% today.
Gregory A. Clay contributed to this article
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